Watch lists are old standbys for stock investors. If nothing else, you can put a stock in a mock portfolio, wait for it to hit your price, and when it does -- BAM! -- you snap it up lickety-split. A watch list also gives you an opportunity to conduct your due diligence while observing how the stock responds to news (such as an earnings announcement) or to market-moving events (such as Alan Greenspan waking up with a hangover).

Watch lists for funds are useful, too, but for not quite the same reasons. Targeting a specific net asset value (NAV) isn't a particularly helpful way to buy a fund. OK, it's downright silly. And the impact of a particular corporate announcement on any fund worth buying should be comparatively muted. Diversification, after all, goes a long way toward smoothing out company-specific volatility, which is a main reason more than 90 million of us invest in funds to begin with.

Wait and see
Instead, I put funds on my watch list for three main reasons. First, if a fund company or a manager I admire opens a fund, I want to see how it fares before recommending it to my Champion Funds members. Generally speaking, I want to see a five-year track record (here are some other things I look for), but I do make exceptions from time to time for managers who have demonstrated elsewhere that they have what it takes to deliver the goods.

Just now, I like a young international fund whose management team has nearly two decades of successful stock-picking experience under its collective belt. (Insert joke about collective waist size here.) Prior success, however, was no guarantee that it would be able to get the job done at the new charge.

Moreover, because its primary experience was with domestic stocks, I needed to be absolutely convinced that its approach -- which features bottom-up, kick-the-tires analysis and a valuation-sensitive focus on global giants such as Sony (NYSE:SNE), Honda Motor (NYSE:HMC), and Unilever (NYSE:UN) -- would work in a global arena. To say that it has would be an understatement. Since its inception, the fund's returns have surpassed the S&P 500 by a wide margin. Not coincidentally, the pick currently ranks as my favorite international stock fund.

Three for the road
Enough, then, with the generalities, let's get specific.

White Oak Growth Stock (FUND:WOGSX) illustrates another reason I add funds to my watch list: It's a terrific fund that's hit some rough patches. By all appearances, the fund still has a lot going for it. The focus is on large-cap growth mainstays such as Cisco Systems (NASDAQ:CSCO), Applied Materials (NASDAQ:AMAT), and eBay (NASDAQ:EBAY); the expense ratio falls well below that of the typical stock fund; and lead manager, Jim Oelschlager, is a seasoned and very successful vet. Turnover has been quite low, too, and the fund's long-term returns are superior.

All of that said, management pursues an aggressive strategy, packing nearly $2 billion in assets into about 20 names. That tack courts volatility. Sure enough, investors have experienced their share of spills and thrills over the last few years. The upshot is that while I continue to think the fund is a good pick for aggressive, risk-tolerant investors with plenty of patience, I'll need to see management clamp down on volatility before recommending White Oak Growth Stock.

A shift in strategy will almost always get my attention, for example, but more often than not, it's a management shake-up that makes a fund list-worthy. Right now, I'm intrigued by the departure of Jim Hillary from the fine Marsico fund shop where, among other duties, he helped manage billions of dollars at the outstanding Marsico Focus (FUND:MFOCX) and Marsico Growth (FUND:MGRIX) funds.

My hunch is that both funds will keep up the good work, even in Hillary's absence. Hillary worked side by side with the firm's namesake, Tom Marsico, who has been large and in charge on both funds since their December 1997 inception and remains at the controls now. And talk about an impressive track record. From inception through the end of March 2004, both funds have notched returns that leave those of the S&P 500 in the dust.

That's no mean feat, of course, but rather than race out to plunk down new money, the wiser course is to add both funds to your watch list. Observing the subtle changes that inevitably follow a management shake-up is a great way to gauge what exactly a former manager brought to the table. And getting a bead on the significant ways a fund alters its course (if any) can go a long way toward helping you determine if a pick would still make sense in the context of your overall portfolio.

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Shannon Zimmerman thinks fund manager trading cards would make great stocking stuffers and, no, he's not kidding. He doesn't own shares of any funds or companies mentioned above. The Motley Fool has a disclosure policy.